What is trader versus investor status, and why is this important? For hedge fund managers actively managing a fund, or investors in that fund, this classification is critically important as it can determine whether expenses related to fund activity are deductible or nondeductible. Prior to the passage of the Tax Cuts and Jobs Act (TCJA) of 2017, investors could deduct portfolio expenses, such as management fees, professional fees, and similar costs, but only to the extent those deductions exceeded 2% of the taxpayer's adjusted gross income (AGI). Under the TCJA, these expenses became fully nondeductible beginning in 2018. Initially, this provision was scheduled to expire after 2025, at which point the 2% limitation rules would have returned.